How to lose $195,000 in 10 days…

I’ve been reading comments about my blog on Twitter these past couple days since I made it public.

I assure you, it is 100% real, not fake as some are claiming.

I think most who are claiming it is fake is because the trade log seems random and ridiculous with no trade plan whatsoever. I fully agree, the trades were all over the place and make no sense.

(Or others are claiming it’s fake because I put in a Paypal link for donations for beer money. Goofy idea I know, but believe it or not, a few of you have bought me a Milwaukee’s Best! I genuinely appreciate the kind gesture, thank you… I just need 39,000 beers to break even…)

What happened to me was I started off trading in control and conservatively playing SSO. But somehow, as soon as I experienced my first loss of only $500 (which involved a $2k-$3k drawdown during the day), things very quickly spiraled out of control.

I don’t know why I would gamble so big on BWLD earnings with a $400k bet on margin just to chase a $500 loss. I did it almost instinctively, without much thought. I just felt the need to get back my $500 and then some, so I chose to play earnings on a momentum stock, especially since CMG was doing so well. I do remember, as I placed the trade, my heart was racing, practically jumping out of my chest. This was an emotional trade to avenge a loss…

In after-hours, I was up $10k on the beat and feeling great. But the next morning, I was quickly down $40k in 30 minutes.

It was extremely painful and I was numb with shock. So I panicked and felt the need to win it all back on the next one and quick. When you have that much pain, you want it gone as soon as possible. So I chose TWTR which was reporting that night, which I knew would swing 10-15% either way.

The crazy thing is I originally wanted to short it, but no shares available. Unfortunately, as a gambler, I just impulsively decided to go long. Like choosing black or red at roulette, for no reason, just because. And I got burned again. And again. And again.

This happened so quickly. I had to make my money back. I had to make it back big and quick. So I took these massive all-in positions. I kept thinking I gotta win on one of these. But I never did. I still can’t believe how many consecutive losses I endured…

I accept all the online criticism and fully agree that I was an “idiot” and “moron”. I have made a horrible mistake returning to trading and I definitely have a gambling problem. The timing on my trading career couldn’t be worse. I quit trading in 2009 after a $130k loss. Never even looked at a stock chart for five years, as I hated stocks. I was long financials in 2009 when Citigroup was at $1. But I gave up after my losses. As it turns out, I quit trading just as the 5 year bull market started.

Then in January 2014, I had a friend casually ask me, do you have any investments? I said no and felt embarrassed to only have savings accounts. I then checked the SP500 and couldn’t believe how much I missed out on. Honestly, I had no idea how the stock market was doing, as I had such a bad taste in my mouth from 09. So I started trading again in Feb 2014 with the genuine hopes of investing. This turned out to be a bad time to get back in as the markets were getting more volatile and toppy. And then with my initial $500 loss, I started making irrational and reckless decisions…

Such bad advice. What if he held on longer and lost even more money? The first thing he needs to do is come up with a game plan and always have defined entries + risk levels. NEVER make a trade without an exit plan, whether for gain or loss. As others have said, this guy needs to learn risk management and learn to trade with a clear mind and plan. Cutting losses quickly is a very important part of this game. If this story is true, I feel for him, but he’s not cut out to be a day trader and possibly even an investor at all. He’s far too emotional to survive in this world.

All the second guessing is driving me crazy. If I just held SSO from $92, it ran to $106. If I just held BWLD from $140, it recovered to the $150’s. I would have made a double on FCEL and CPST. Even LNKD recovered a bit from the earnings sell off. Only TWTR continued to fall relentlessly. But at the time, the pain of losing $40k to $50k on a single trade was too much to bear, so I closed it out with the hopes of making it back elsewhere. Of course, it only led to bigger and faster losses elsewhere… Too much leverage and the emotions got the best of me.

I feel your pain. One of my favorites, SINA took it on the chin for 2 straight months. Its EV is $5 billion, yet it now only has a market cap of $3.6 billion. I think SINA will go up 50%, but it will take a bit of time.

I’m at FinancialSamurai.com if you ever want to drop buy. I hate stocks, but am “forced” to have about 25-30% of my net worth exposed to stocks for diversity purposes. Real estate is my favorite asset class.

Sameguy summarized it nicely. Remember you trade on others investment. Meaning BWLD is 142 today!!. even if you had cut loss 1/2 and held 1/2 you are doing good.

You violated all rules of trading.

1. Trade less in amount.
2. NEVER EVER EVER buy or sell after hours.
3. NEVER EVER EVER play earnings day stocks
4. Play only blue chips like wfc jpm v ma axp hd KORS etc – these can go down but wont wipe you off.
5. Get into a position with CLEAR risk defined and if that risk is too much then DO NOT enter the position both long/short.
6. NEVER EVER play cloud/social stocks. These are not blue chips but momo chips which can cut in any direction.
7. If you enter a good position in good stock and if you had risk defined, hold onto to the stock. Stocks unlike options always comes back especially blue chips.
8. Remember day traders never make money. Dont think urself as day trader but as an investor when you enter and if that investment turns against you, just hold

You make some good key points, but also some bad advice as well. First off, I am a day trader and am VERY successful at what I do. I failed many times and blew up my account multiple times, but over the years, I kept learning and worked on it. I know several daytraders who are the same and make more money than you’ll ever dream of. Next, I’ll go over your key points:

1: Yes, never go all-in on any position no matter how much confidence you have in it.
2. Wrong. I trade after hours here and there, but not typically stocks that are moving 5-10% within minutes.
3. I agree here, never play earnings. I don’t even recommend gambling with pocket change as it just develops bad habits.
4. For non-daytraders and those without the ability to control their emotions, I agree. Guys like the author need to stick to the slow movers and non-volatile stocks.
5. 100% agree.
6. Disagree in general, but for the author, I agree. Someone of his level should clearly stay away.
7. Yes and no. Once you hit a reasonable profit level, you start scaling out (according to a gameplan you set before entering) and adjust stops… or use trailing stops. Stocks do NOT always come back…. and sometimes, even if it does, some stocks will keep going down for longer than you can stomach. My personal rule is max 2% loss on ANY trade.
8. Again, 100% disagree. You are totally ignorant due to your personal lack of daytrading skill and believe others are the same as you.

This guy needs to soul search, read books, block out the noise, and STUDY if he wants to trade. Paper trade. Control your emotions. This might be harsh, but it really seems to me you aren’t cut out for trading. Not everyone is. I have some friends whom I would recommend to trade, while others I tell to stay away. Either way, best of luck.

I would have to disagree with #8, I’m a day trader and I make money. In fact I’m doing a little experiment using the MACD study for a month starting an account with only $300. Day 3 and the account is up 20.2%.

With that being said, I would replace that with the 10% rule, meaning only play with 10% of your max portfolio, why? So you are able to hold these stocks and still have the funds when you come across new ones and/or buffer your losses by investing in some dividend stocks. Get stocks that will pay out every month for the year. The price on those don’t worry about as much (as long as they aren’t tanking), their purpose is to bring you a little extra every 3 months.

I would of recommended taking smaller positions and keeping at least some cash to the side at all times, getting rich quick normally doesn’t work unless you are an insider. I have only stumbled across maybe a handful of stocks that I knew 100% they were profitable, generally I do not play earnings because of the risk of uncertainty. I don’t think you should quit trading, but I do think you need to leave your emotions to the side and trade a plan. Andrew Keene has a great trading plan, I posted a link so you can check it out. http://keeneonthemarket.com/kotm-trading-rules/

I won’t pepper you with “y’know what ya shoulda done…” peanut gallery-type comments.

I genuinely felt so bad for you after coming across your brave (yep, brave) posts. It briefly occurred to me that this could have been some sort of performance art creation, but I feel it’s unfortunately all too real..because I’ve seen trading like this before first-hand. It shouldn’t happen, but it does.

Not knowing your circumstances, this is likely a devastating event, but I hope you’ll seek out the support and guidance you need before delving back into investing. And really, not everyone is suited to this. No shame in that. There are other options for your money and savings – even a boring old bank account is sometimes the smart play.

Thanks for the encouragement TraderVancouver. Yeah, I know what I shoulda/coulda/woulda done different. But I screwed up big time. I gambled away my savings which I worked so hard for. And I’m paying the price…

agree with tradervancouver. i have taken print out of the images here and pasted over my desk and so everytime i make my trade i think of the trades that you posted to make sure i am not making the same angle/trade/mistake.

thanks for sharing and remember you can bounce back. 195k is a big amount no doubt but it is not that it can bankrupt you. so relax, get out of the shell (i guess you are already in one), spend time w/ wife/gf/kids, go for long walks and do things that you want to do in this lapse.

also i would suggest you to watch the market every minute (without opening your account) by opening another 100 or 500 dollar account in another brokerage. this is to make sure you can get discpline of not trading as not trading/not overtrading is also a trading discipline.

remember if you ever want to trade again, follow my paper trade advise strictly and see if you can make paper profits first.

You recognize the gambler in you and confess you seek excitement in the market.
Before you rush into the stock market again, reflect on this; Few professional managers beat the indexes they track. And very very few retail investors make any money at all, period! The odds are firmly stacked against you! No, they are stacked against all of us!

If you can’t do without the excitement, put your money an index-tracker fund. You will beat virtually all retail traders and the majority of professional fund managers!
And believe me, you will get the ups and downs of the market. The only difference, no-one will laugh at you. Most will in fact envy you!

However, you simply cannot go into the market without a plan – which you must then follow without fail!
Follow these steps…
1. Paper trade your plan(or system) against your index funds for at least a full year.
2. Then, if and only if, it shows better returns than your index funds, put at most 5% of your invested funds in it. Again, trade against your index funds.
3. If your system beats the return of your index funds, keep your index funds going but add any new investment money to your system, not to the index funds.
4. If your system survives the previous 3 steps, continuously re-asses whether all the effort (AND PAIN) in executing it is worth it.

Thanks for the advice. And to think before I my first trade in February, I was looking at lists of some no-load mutual funds to put my money into. But then I got lured into the excitement of the market…

did you see the markets today. at -100 or so at LOD it gave clear oversold signal on huge number of stocks. that’s what you can do with 195K :-). go in diversified like an investor like 1000 $fb at 57 or 1000 $splk at 60 come back or 1000 axp at 84.5 or 87 1K for kors and you hold like investor and sell at end of day.

But this will call for extreme discipline, woman like patience, ability to stand firm if stocks turn against you as you are going at very oversold levels or market.

Remember you are not day trading in above entries. You are going as investor and if yes market bounces you sell. if not then you hold. you are diversified and so will not hit you big.

Also nowadays these kind of setups are happening regularly as HFT and algo’s and neck deep leverage hedgies are causing chaos both long and short side.

First, you tell him to avoid momo stocks and now you tell him to buy FB and SPLK? You’re a joke, dude. No one should listen to you. Just because something looks oversold does not mean it can’t get MORE oversold. TWTR has been looking oversold at 65, at 60, at 55, all the way to 40. I’m sure you would’ve bought 1k shares at 65 and 60, huh? Averaging all the way down (yes, I actually traded it a few times on the bounces, but that’s because I know how to trade). Stop giving this poor guy bad advice.

I blew up once too, it has everything to do with emotion and no logic. Basically when real life stresses you out, and you want to force reality, because you don’t like your current reality. Its easy to make a mistake. Its the ego.

Totally agree with this. Emotions are a big issue with all traders, including me. It’s a problem I still have at times. I win in over 80% of my trades, BUT sometimes I sabotage myself by letting those 20% losers grow large and break loss-taking rules. It’s often due to ego (not wanting to admit/accept a loss) and stress in my personal life. It’s a flaw that I’m still working on correcting, but for the most part, I do really well. Revenge trades, trying to make up for the last loss, gambling on earnings, etc… all emotional stuff that should not be a part of trading.